Which of the following accounts will be closed by crediting retained earnings?Group of answer choicesService revenueAccumulated depreciationDepreciation expenseAccounts payable
Question
Which of the following accounts will be closed by crediting retained earnings?Group of answer choicesService revenueAccumulated depreciationDepreciation expenseAccounts payable
Solution
The account that will be closed by crediting retained earnings is the "Service Revenue" account. Here's why:
- Service Revenue: This is an income account that records the revenue a company earns from providing services. At the end of the accounting period, the Service Revenue account is closed to the Retained Earnings account. This is done by debiting Service Revenue and crediting Retained Earnings. This increases the balance in Retained Earnings.
The other accounts listed (Accumulated Depreciation, Depreciation Expense, and Accounts Payable) are not closed by crediting Retained Earnings.
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Accumulated Depreciation: This is a contra-asset account that accumulates the total depreciation of a company's assets. It is not closed at the end of the accounting period, but continues to accumulate over the life of the assets.
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Depreciation Expense: This is an expense account that records the portion of an asset's cost that is allocated to the current period. At the end of the accounting period, it is closed to the Income Summary account, not Retained Earnings.
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Accounts Payable: This is a liability account that records amounts owed to suppliers. It is not closed at the end of the accounting period, but carries its balance forward to the next period.
Similar Questions
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